The United States is set to clash with the British Government over £155 million in state aid given to the Shorts aerospace factory in Belfast. US trade negotiators have told The Times that they are seeking further information from the Government over the reason for the aid.

Trade lawyers said that this was the first step in a process that could lead to a full trade dispute between the two countries. The Department for Business arranged last month for the aid to be given to Bombardier, the Canadian engineering company, to ensure continued work at the Shorts factory.

This is part of $1 billion (£520 million) raised by Bombardier from the Canadian, Quebec and British governments to help to launch its C-Series aircraft. The US considers launch aid to be illegal and it could challenge the project through the World Trade Organisation (WTO).

The US is Britain's largest trading partner after the European Union and a dispute between the two countries could be embarrassing for the Government and damaging to business.

The US has long argued that launch aid is an unfair competitive advantage to the companies that receive it. The US has already brought a case to the WTO challenging the billions of euros in launch aid that EU states, including the UK, have given to Airbus over the past 30 years. A decision is expected in that case possibly next month.

Sean M. Spicer, assistant US trade representative, said: “The United States has long expressed concerns about government financial support for the launch of commercial aircraft and has pursued this issue with the Europeans in the WTO. Washington will take a very careful look at the support announced by Canada, Quebec and the UK to ensure they do not distort the market for commercial airliners or contravene WTO rules.”

The $3.4 billion C-Series project will enable Bombardier, which makes the Learjet, to compete with Boeing and Airbus in smaller commercial jets. Bombardier bought Shorts in 1989 and the factory is Northern Ireland's largest manufacturing employer.

A trade lawyer familiar with launch aid disputes said: “The US Government is making inquiries about the nature and terms of the money being provided to Bombardier. If, as seems likely, it is deemed launch aid, the US could take the matter to the WTO.”

A Department for Business spokesman declined to comment. Bombardier said: “Government support for aircraft manufacturing can be expected to attract some international scrutiny. Federal participation in this project is consistent with Canada's WTO obligations.”

The US is not the only government claiming foul play in the aerospace market. The EU has begun its own WTO case against the US claiming that it subsidises Boeing through its military and space budgets.

If the WTO finds that the launch aid provided to Airbus for aircraft such A380 was illegal, the company will have to repay the money and will be unable to receive more.

The UK, France, Germany and Spain are negotiating with Airbus on how much launch aid should be given for its next aircraft, the A350. Airbus is looking for about $1.7 billion in aid.

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